Seamless Web TV Experience Meets Resistance

Media Morph: Boxee

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WHAT IS IT? A New York-based start-up that makes free, open-source software that turns your computer into the equivalent of a powerful set-top box that can play anything from Hulu to iTunes to videos saved on your hard drive. Furthermore, it's formatted for the big screen, meaning it makes the PC-to-TV connection even more appealing, and, with a handy app, it turns your iPhone into a remote.

WHO'S BACKING IT: Boxee was founded in 2007 by CEO Avner Ronen and has offices in New York and Israel. In November it received $4 million from Union Square Ventures' Fred Wilson and Spark Capital's Bijan Sabet. Both joined the board.

IS IT A BUSINESS? Not yet. As with Twitter, Boxee's first priority is building a user base, Mr. Ronen said. Ultimately, he said Boxee could charge content owners for promotion on the system. "If Boxee is a way people get access to TV shows and movies and music, if we promote from Amazon or Netflix or Hulu, that has value to those content partners," he said. "

So, what's the problem? Well, Boxee got noticed by cable and broadcast networks, which pressured Hulu to start blocking it two weeks ago. Since then, it's been a cat-and-mouse game as Boxee engineers devise work-arounds and Hulu engineers stop them. The issue is that Boxee made it a little too easy to watch web video on TV, which causes two problems: First, when users watch a show online, the networks earn a fraction of the ad revenue they earn when people watch on TV. Second, it's likely Boxee might encourage people to just drop cable, depriving operators of subscription revenue.

How will this be settled? It's unclear, but Mr. Ronen is enjoying the ride. "It's great fun to be at the forefront of disruption of this business," he said. "At this stage we want to reinvent how people use that big screen. It's been stagnant for a long time, and we'd like to be one of the platforms that helps people do that."

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